Flood Insurance for Floodplain Managers - uaiia.org Flood...Flood Insurance 101. 1. Purpose: The purpose of this module is to stakeholders to understand flood insurance by providing
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Diana B. Herrera, CFM Region 8 Sr. Regional Flood Ins. Liaison National Flood Insurance Program Flood Insurance 101 1
Diana B. Herrera, CFMRegion 8 Sr. Regional Flood Ins. Liaison
National Flood Insurance Program Flood Insurance 101
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Presenter
Presentation Notes
Purpose: The purpose of this module is to stakeholders to understand flood insurance by providing accurate information and advice about the rules, policy coverage, rating elements and claims handling at a high level. More information can be found in the Flood Insurance Manual. ��Time: 3 hours��Content Outline: This presentation includes the following major topics: Introduction (15 minutes) The Basics (1 hour) NFIP Coverage (45 minutes) NFIP Flood Insurance Rating (2 hours) NFIP Policy Information (30 minutes) Rate and Rule Changes (30 minutes) Outreach (30 minutes) Summary (30 minutes) Equipment: One LCD unit or overhead projector with screen One lavaliere microphone for the instructor Two wireless microphones Materials: Instructor Guide Student Manual Module exam
•If you tell your client they don’t need flood insurance…•If you tell your client it’s not covered…•If you tell your client it’s never going to flood…•How are you going to feel when it happens to your client and you told them they did not need it…
How good is your E & O?
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What is the job of an agent?
• Identify what risks your clients are exposed to
• Counsel them of the risks without coverage• May not have Federal disaster assistance• Emotional• Physical• Financial
• Cover their risk• If they do not want it, have them sign
a disclaimer to protect you, your agency, your E & O
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Why Stay Informed & Inform Your Clients?
• Always Investigate the Flood Risk Potentialof every piece of property.
• Remember that you play an important role in the notification process.
• Flood insurance requirement may cause withdrawal offers
• The potential buyers could misunderstand the meaning of risk
• Buyers could misunderstand the cost of flood insurance and the coverage that is provided
• Don’t be the horror story for a new home buyer/seller
• Be the informed insurance agent & BE THEIR HERO
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Why Stay Informed & Inform Your Clients?
Lawsuit Risks • Property owners may be unaware of
the flood risk• Your clients may turn to the courts
for uninsured damages suffered during a flood
• Misrepresentation or failure to disclose the flood risk
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Mapping
What's My Flood Risk
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FEMA Mapping/Flood Zones • High Risk Flood Zones: Any A or V zone
• Moderate to Low Risk Flood Zones: Any B, C or X zone
• D zones: Unmapped, in more rural areas and rated as an A zone until it does get mapped
• Colorado’s 2013 flooding had record claims in low to moderate floodzones
Low risk doesn’t mean NO RISK!
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Presenter
Presentation Notes
Now the good news. Properties that are built Post-FIRM and in compliance in A1-A30 and AE Zones will see an increase in premium of only 1 percent. Properties in AO and AH including those built in compliance will see no change in the premiums. Policies in structures built in Unnumbered A zones will have an increase of 5% in their premiums Standard-rated policies in B, C or X flood zones will increase 2%. However, PRP premiums will remain unchanged Our other miscellaneous policies, Group Flood Insurance (policies provided to Individual Assistance grant recipients limited to the maximum grant allowance during the year of the disaster and only a 3-year certificate of coverage), Tentative and Provisional rating and Mortgage Portfolio Protection Program will also see no increase in premiums.
Flood Zones
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FEMA Map Service Center
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http://msc.fema.gov/portal
FEMA Map Service Center
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FEMA Map Service Center
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FEMA Map Service Center
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http://msc.fema.gov/portal
FEMA Map Service Center
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http://msc.fema.gov/portal
Accessing Historical Maps
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Presenter
Presentation Notes
Both methods will get you to one of two screens. The last screen will be the same for either avenue that you travel-Historical Products. If historical maps for a community are available, they will be listed on this tab. For many of the communities, you will see multiple map revisions and can select the map for the property in question prior to construction. You may not be able to make a FIRMette from the Historical site. However, you can use the Snipping Tool in your Accessories folder under your Start Menu.
FEMA Map Service Center
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Accessing Map Info
Who Writes Flood Insurance?
• State Licensed Insurance Agents, Brokers, Carriers:
• Can write property and casualty policies
• Is in good standing with the state licensing department
• Must meet any mandatory training requirements
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Presenter
Presentation Notes
Explain that the person who writes flood insurance is a State Licensed Insurance Agent who: Can write property and casualty policies. Is in good standing with the licensing department. Has completed mandatory training requirements. Tell the participants that they can find an NFIP Insurance Agent by using one of the following: www.floodsmart.gov 1-888-379-9531
Who Can Buy Flood Insurance?
• Anyone in a participating community
• Homeowners• Business owners• Renters-personal and commercial• Public buildings
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Write-Your-Own (WYO) & NFIP Direct
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NFIP DirectWYO Program Allows agencies to
write flood insurance coverage with the government
Provides assistance and advice to NFIP Direct program agents and adjusters via the NFIP Direct Servicing Agent
Allows agencies to create quotes, submit applications, and view policy information
Allows participating insurance companies to write and service NFIP policies in their own names Operates as part of
the NFIP and is subject to its rules and regulations
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Presenter
Presentation Notes
Explain that the Write Your Own (WYO) Program began in 1983 and is a cooperative undertaking between the insurance industry and FEMA. Review the following key points: The WYO Program allows participating property and casualty insurance companies to write and service the Standard Flood Insurance Policy (SFIP) in their own names. Note that the companies receive an expense allowance for policies written and claims processed, while the Federal Government retains responsibility for underwriting losses. The WYO Program operates as part of the NFIP and is subject to its rules and regulations. The WYO Program is intended to: Increase the NFIP policy base and the geographic distribution of policies. Improve service to NFIP policyholders through the infusion of insurance industry knowledge. Provide the insurance industry with direct operating experience with flood insurance. Explain that NFIP Direct is a program established by FEMA to allow any agency the opportunity to write flood insurance coverage directly with the Federal Government. Review the following key points: The NFIP Servicing Agent assists and advises agents and adjusters who handle Direct Program policies. An agency enrolled in the program has access to the secured area of NFIPServices.com, which allows the agency to create quotes, submit applications, apply credit card payments, report First Notices of Loss, and view customers' flood policy information.
Insurance Terms and Concepts
• Actual Cash Value (ACV)• Replacement Cost Value (RCV)• Market Value • Risk• Spreading the Risk• Peril
Review the following insurance terms and concepts: Actual Cash Value (ACV): The cost to replace with new property of like kind and quality, less depreciation. Replacement Cost Value (RCV): The cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose. Market Value: The price that an interested but not desperate buyer would be willing to pay and an interested but not desperate seller would be willing to accept on the open market, assuming a reasonable period of time for an agreement to arise. Risk: Uncertainty of financial loss; term used to designate an insured or a peril insured against. Spreading the Risk: Method by which each member of an insurance pool shares in each and every risk written by the other members of the pool. Peril: That which could cause loss. Insurance Agent: A person licensed by the State and given authority by the insurance company to sell insurance. Insurance Broker: A person who, for compensation and on behalf of another person, transacts insurance other than life with, but not on behalf of, an insurer. Underwriter: Insurance underwriters evaluate applications for insurance policies. They assess the degree of risk to the insurance company of the person or property listed on the application. Actuarial Rating: Premium rate calculated by a mathematician in the insurance field. Actuaries conduct various statistical studies; calculate premiums, reserves, and dividends for participating policies. Subsidized Rating: Rating having partial financial support from public funds. Claims Adjuster: The insurance representative who investigates and settles claims on behalf of the insurance company.
General Rules
Topics:• Community Participation• Nonparticipating
communities • Lender Requirement
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Presenter
Presentation Notes
Explain that the next portion of this module will discuss the general rules for writing NFIP flood insurance, including the following topics: Community Participation Nonparticipating Applicants Mandatory Purchase Requirement Coastal Barrier Resources Act
Community Participation (1 of 2)
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FEMA authorizes the sale of additional flood insurance in the community up to the Regular Program limits.
Flood Insurance Rate Map issued.
The community implements floodplain management measures.
FEMA authorizes the sale of flood insurance up to the Emergency Program limits.
No Flood Mapping to identify risk
Regular ProgramEmergency Program
Presenter
Presentation Notes
Explain that community participation in NFIP flood insurance refers to a community that voluntarily applies to participate in the NFIP in order to purchase flood insurance. Tell the participants that reasons to apply may be: Community interest in flood insurance, or Notification from FEMA that the community contains one or more Special Flood Hazard Areas (SFHAs). Note that the application includes adopted resolutions or ordinances to minimally regulate new construction in SFHAs. Review the key points of the two types of NFIP programs: Emergency Program: FEMA authorizes the sale of flood insurance in the community up to the Emergency Program limits. FEMA assesses the community's degree of flood risk and development potential. If appropriate, FEMA arranges for a study of the community to determine base flood elevations and flood risk zones. Consultation with the community occurs at the start of and during the study. Communities with minimal or no flood risk are converted to the Regular Program without a study. FEMA provides the studied community with a Flood Insurance Rate Map (FIRM) delineating base flood elevations and flood risk zones. The community has 6 months to adopt base flood elevations in local zoning and building code ordinances, and to meet other requirements. Once the community adopts more stringent ordinances, FEMA converts the community to NFIP's Regular Program. Regular Program of the NFIP: In the NFIP Regular Program, FEMA authorizes the sale of additional flood insurance in the community up to the Regular Program limits. The community implements adopted floodplain management measures. FEMA then arranges for periodic community assistance visits with local officials to provide technical assistance regarding complying with NFIP floodplain management requirements. Local officials may request flood map updates as needed. FEMA evaluates requests, encourages cost-sharing, and issues revised maps as priorities dictate.
NFIP Limits of Coverage
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The Insured NFIP Coverage LimitsBuildings Emergency
ProgramRegular Program
Single Family $35,000 $250,000
Other Residential
$100,000 $500,000
Nonresidential $100,000 $500,000
Contents
Residential $10,000 $100,000
Nonresidential $100,000 $500,000
Presenter
Presentation Notes
Explain that the limits of NFIP coverage depend on the type of building and whether the emergency or regular program is in effect. Review the limits, which are listed below :
Nonparticipating Sanctioned or Suspended Communities
• No NFIP flood insurance• Limited Federal disaster assistance• An inability to meet mortgage/loan
requirements for flood insurance• No Federal loans and grants
• SBA• HUD-FHA, Rural Development…• VA
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Presenter
Presentation Notes
Explain that a community with one or more identified SFHAs has 1 year to apply to participate in the NFIP. Tell the participants that if the community fails to join: Flood insurance will not be available in the community. Disaster assistance will be limited. Availability of mortgages and other loans that require flood insurance will be severely restricted, because new flood insurance policies may not be written and existing policies may not be renewed.
Non-Participating Communities
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Lender Requirement
• Applies to properties in SFHAs.• Insurance is a prerequisite to receive a loan
from Federally regulated and insured lenders• The requirement is triggered when a loan is:
MadeIncreasedRenewedExtendedDiscovered
• In effect for the life of the loan• Lenders may still require flood insurance for
Non-SFHA (*Refer lenders to their regulators*)
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Flood Fact: In SFHA there is a 26% chance of flood loss over a 30-year period.
Presenter
Presentation Notes
Explain that the mandatory flood insurance purchase requirement applies to properties in SFHAs. Tell the participants that, under the provisions of the Flood Disaster Protection Act of 1973, individuals, businesses, and others buying, building, or improving property located in SFHAs within participating communities are required to purchase flood insurance as a prerequisite for receiving any type of direct or indirect Federal financial assistance (e.g., any loan, grant, guaranty, insurance, payment, subsidy, or disaster assistance) when the building or personal property is the subject of or security for such assistance. Explain that the mandatory purchase requirement is triggered when a loan is: Made. Increased. Renewed. Extended. Note that the insurance should be in effect for the life of the loan.
Deductibles
•Minimum deductibles on NFIP policies are:
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• Maximum Deductible on NFIP Policies is:Residential: $10,000Non-Residential: $50,000
Presenter
Presentation Notes
Explain that a deductible is the amount that the insured pays toward the amount of a loss. Tell the participants that the NFIP policy covers the balance of the claim. Note that deductibles vary according to whether buildings are pre- or post-FIRM, and that the amount of the deductible can be raised or lowered. Review the standard deductibles on NFIP policies: Pre-FIRM: $2,000 Building/$2,000 Contents Post-FIRM: $1,000 Building/$1,000 Contents Optional: Higher deductibles are available, and an insurance agent can provide information on specific amounts of available deductibles. Optional high deductibles reduce policy premiums but will have to be approved by the mortgage lender. Explain that the NFIP offers a buy-back feature that permits insureds to “buy back”—in consideration of additional premium—a reduced deductible under the Standard Flood Insurance Policy (SFIP). Explain that if insufficient premium payments are discovered prior to a loss, the insurer will send a notice of the additional premium due to purchase the coverage originally requested, provided that the required information is available to calculate the underpayment amount. Tell the participants that if the additional premium is received within 30 days from the date of written notice, the policy is reformed as of the inception date or endorsement effective date to provide the amount of flood insurance coverage initially requested.
General Rules
• Policy term for an NFIP insurance policy is 1 year
• Premium must be paid for the entire year upfront by check, money order or credit card
• Policy can be assigned to a new owner
• There can be a waiting period: • 30 Days• 1 Day• 0 Days• Wildfire Exception
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Presenter
Presentation Notes
Explain that the policy term for an NFIP insurance policy is 1 year. Review the steps to assign—or transfer—the policy to a property’s new owner: The policy is assigned to the new owner at property settlement. An Endorsement Form is used to make the change request.
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NFIP Policy Forms, Products, and Eligibility Requirements
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Presenter
Presentation Notes
Tell the participants that NFIP policy forms include: The Dwelling Form. The General Property Form. The Residential Condominium Building Association Policy.
FloodIn the National Flood Insurance Program (NFIP), a flood:
• Is surface water from any source
• Occurs in at least 2 acres or two or more properties
• Can include a mudflow:River of liquid and flowing mud
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Presenter
Presentation Notes
Explain that the term “flood,” as used in the National Flood Insurance Program (NFIP): Includes surface water from any source. Refers to flooding in at least: Two or more acres. Two or more properties. Can include a mudflow or other spill that: Flows like a river. Seeks its own level. Explain that the photo shows a disaster in Boston, during which an enormous storage tank of molasses collapsed. Review the accounts of that incident: Reports from witnesses at the scene stated that machine gun-like sounds were heard as the rivets burst from the tank, and that the ground shook from the explosion. Several also reported that the rumbling sound was similar to a train passing by. As the tank collapsed, a wave of molasses 8 to 15 feet high spilled onto the street, breaking girders on the Boston Elevated Railway’s Atlantic Avenue and actually picking the train up off the tracks. Many buildings were knocked off of their foundations and destroyed. The molasses was reported to be 2 to 3 feet thick several blocks from the collapse. The Boston Globe reported that people "were picked up by a rush of air and hurled many feet.“ Many more were injured by flying debris from the blast of the initial explosion. Approximately 150 were injured; 21 people and several horses were killed.
Flood
•In the National Flood Insurance Program (NFIP), a flood:
• Can include a mudflow:• River of liquid and flowing mud
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Farmington, UT 1983 debris flow Damage from a March 1995 debris flow that issued from Peña Canyon, Malibu, California. View is looking east along California State Highway 1 (Pacific Coast Highway) (Photo: California Department of Transportation).
FloodMudflow versus Landslide
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LaConchita Landslide, 2005
Presenter
Presentation Notes
The public and the news media use several terms interchangeably-mudflow, mudslide, landslide, debris flow. So let’s take a look at the difference. Most property policies use the word "landslide" as an exclusion, but few actually define the term. How do you differentiate between them? When policyholders and insurers disagree about the meanings of terms not defined in insurance contracts, they usually turn to the courts to define the terms . If no prior decisions have been made, courts may rely on common dictionary definitions. The Merriam-Webster dictionary defines landslide as a the usually rapid downward movement of a mass of rock, earth, or artificial fill on a slope. Mudslide is defined as a large mass of wet earth that suddenly and quickly moves down the side of a mountain or hill. Mudflow is defined as a moving mass of soil made fluid by rain or melting snow. Debris flow could actually be a combination of them all. As you can see the definitions are very similar. And therein lies the problem. Landslides occur in all 50 states according to the U.S. Geological Survey (USGS). The USGS provides several causes: Slides that can be triggered by materials themselves such as rocks may slide because they are weak or cracked, sometimes by human manipulation such as mining, logging, or irrigation. Slides can occur from meteorlogical changes by ice, rain, melting snow, or after a fire where the vegetation is gone, volcanoes, earthquakes or agricultural activities. Like "landslide", the term "mudflow" appears in many property policies but is rarely defined. However, this mudflow is defined in the Standard Flood Insurance Policy used in the National Flood Insurance Program (NFIP). The flood policy defines "mudflow" as a river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water. The Standard Flood Insurance Policy states in Exclusion that : We do not insure for loss to property caused directly by earth movement even if the earth movement is caused by flood. Some examples of earth movement that we do not cover are: 1. Earthquake; 2. Landslide; 3. Land subsidence; 4. Sinkholes; 5. Destabilization or movement of land that results from accumulation of water in subsurface land area; or 6. Gradual erosion. What's the difference between "a river of liquid mud" and “accumulation of water in subsurface land area?" The answer has to do with the amount of water the mixture contains and where is the water. To qualify as mudflow, a mixture of earth and water must be liquid, like concrete or milkshake. A thick mass of mud that slides down a hill is not "a river of liquid mud." Thus, it does not qualify as mudflow. In the La Conchita Landslide in 2005 in California, the slide was the result of subsurface water that had destabilized the area from heavy rains along with agricultural activities on top of the landmass. Like "mudflow", the word "mudslide" is used in many commercial property policies but the term is not defined. The policy form used in the NFIP Standard Flood Insurance Policy makes no mention of mudslide. According to the USGS, "mudslide" is a encompassing and loose term. It is commonly used by the news media to refer to a variety of events including landslides, mudflows and floods filled with debris. A "mudslide" may qualify for coverage under the flood policy if it meets the definition of "mudflow". That is, if a policyholder submits a claim for damage caused by liquefied mud, the damage may be covered even if the policyholder refers to the cause as a "mudslide.“ As the NFIP is a surface water program, the structures that were damaged in La Conchita, were not covered under the NFIP flood policy. We are looking into the future to clarify the terms in the flood policy when it comes to mudflow. One suggestion is to use the words debris flow which seems to more clarifications through state and federal publications. As we map areas of the country where this type of activity occurs, the concerns are becoming greater that the mandatory purchase requirement in AO flood zones on alluvial fans may not provide coverage for the “mudflow” when it occurs leaving policyholders with false expectations and financially devastated. Stay tuned for WYO Bulletins that address this issue.
Building Eligibility
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• Two or more outside rigid walls and roof• Manufactured (mobile) home or travel
trailer, if affixed to a permanent foundation and anchored
• Single-family, two to four-family, other residential, nonresidential (business & other non-residential)
• Buildings in the course of construction• Includes additions and extensions• Principally above ground• Not entirely over water
Presenter
Presentation Notes
Explain that the following features describe buildings that are eligible for NFIP flood insurance coverage: The building: Must have two or more outside rigid walls and roof. May be a manufactured (mobile) home if 16ft long and 600 square feet when extended. May be a travel trailer. May the following types of occupancy: Single-family Two- to four-family Other residential Nonresidential Includes additions and extensions. Walls may be: Breakaway. Shear (parallel or nearly parallel). Solid perimeter foundation.
Contents Eligibility
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Eligible Vehicles and ContentsEligible Contents
Located inside the building at the described location Used to service the location Used to assist the
handicapped Unlicensed
Located inside a fully enclosed building, or secured to prevent flotation out of the building Can be in a silo,
grain storage building, or cistern
Presenter
Presentation Notes
Explain that building contents that are eligible for NFIP flood insurance contents coverage are: Located Inside a fully enclosed building or Secured to prevent flotation out of the building Tell the participants that silos, grain storage buildings, and cisterns are eligible for contents coverage. Note that, to be eligible, self-propelled vehicles and equipment should be located inside the building at the described location and: Used to service the location or Used to assist the handicapped and Not licensed for use on public roads. Note that Commercial Contents Coverage is available.
Building Foundation Types
• Building types are key to both FPM and flood insurance
• The type of building determines where the LFE is measured, depending upon:• Non-elevation design
requirements• Flood zone• Lowest Flood Guide
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Occupancy Types
Building Types• Single family• 2-4 family• Other residential• Non-residential (Business & Other)• Condominium• Manufactured Home
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Presenter
Presentation Notes
What is in the building and how is it used? (Building type and the percentage of use) Six building types (Clearly explain the building types) Single family less than (50% incidental occupancy) 2-4 family (25% incidental occupancy) Other residential less than 25% More than 4 Non-residential Manufactured home Building Type depends of usage of the building % of use Single family-incidental occupancy< 50% of total square footage 2-4 family- incidental occupancy <25% of total square footage Other Residential-incidental occupancy<25% total square footage All of these change occupancy to non-residental usage
Condominium
• Different types of condominium coverage are available.
• The coverage can be:• Through a building association.• Obtained by a unit owner.• For residential units or buildings.• For nonresidential units or buildings.
• Unit owners must provide acceptable proofs of insurance to the condominium building association.
• The total amount of coverage desired each building must not exceed the lesser of $250,000 (Regular Program limit) times the total number of units in the building or RCV.
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Presenter
Presentation Notes
Explain that different types of condominium coverage are available. The coverage can be: Through a building association. Obtained by a unit owner. For residential units or buildings. For nonresidential units or buildings. Note that unit owners must provide acceptable proofs of insurance to the condominium building association. Explain that the total amount of coverage desired on the entire building must not exceed $250,000 (Regular Program limit) times the total number of units in the building.
Examples of Eligible Risks
Building Contents Condominiums
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Presenter
Presentation Notes
Explain that the photos on the visual show examples of eligible flood insurance risks that could be insured under the NFIP, including garden equipment and condominiums.
Ineligible Property
Ineligible property includes:• Building issued Sec. 1316 • Gas/liquid storage tank • Building entirely over
water • Building >50% below
ground • Most finishes and
contents in basements or enclosures
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Presenter
Presentation Notes
Tell the participants that property that is not eligible for NFIP flood coverage includes: Buildings that are noncompliant with the local floodplain ordinance and have been placed on the 1316 Property List. Container-type buildings, such as oil tanks. Buildings entirely over water. Buildings that are partially underground. Basements and elevated building enclosures.
Activity: Eligible?
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Presenter
Presentation Notes
Activity Purpose: This activity allows participants to apply some of the flood insurance eligibility rules to specific buildings. Estimated Activity Completion Time: 5 minutes Activity Instructions: Refer participants to the photos in the visual. Ask the group: Which of these structures are eligible for NFIP flood insurance coverage? If necessary, explain that: The greenhouse might be eligible if securely anchored. The partially constructed building is not eligible, because it doesn’t have a roof. The gazebo is not eligible because it doesn't have two or more rigid walls. The travel trailer could be eligible if it were on a permanent foundation, but is not eligible when traveling.
Activity: Eligible?
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Activity: Eligible?
Presenter
Presentation Notes
Activity Purpose: This activity allows participants to apply some of the flood insurance eligibility rules to specific items. Estimated Activity Completion Time: 5 minutes Activity Instructions: Refer participants to the photos in the visual. Ask the group: Which of the pictured items are eligible for NFIP flood insurance coverage? If necessary, explain that neither of them is eligible: Pets are not covered. The home built over water is not eligible.
Other Insurance Products
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Group Flood Insurance Policy (GFIP)
Preferred Risk Policy (PRP) & Newly Mapped
Provided to Federal disaster assistance recipients 3-year certificate NFIP Direct Servicing Agent Letters sent before
expiration flood coverage required for
future disaster assistance eligibility At expiration of certificate,
recipient must obtain own insurance for life of building
Individual policy Residential - dwelling form;
nonresidential - general property form
Lower premium due to minimal loss history, lower risk zone
Provides building & contents coverage together
PRP - B, C, X zones Newly Mapped – B, C, X to
SFHA
GFIP Certificate holder can get own coverage at anytime through insurance agent.
Presenter
Presentation Notes
Explain that the Preferred Risk Policy is an individual policy. Note that: The Dwelling Form is used. A Preferred Risk policy has the lowest NFIP premium rates. Explain that a Group Flood Insurance Policy (GFIP) insures individuals who suffered flood losses resulting from a disaster that received a Presidential declaration. Tell the participants that the policy term is 3 years. Review the following features: Receipt of Disaster Assistance. Covered individuals were named by a State as recipients of an Individuals and Households grant program award for flood damage. Letters to Insured. A notice is sent to the policyholders approximately 60 days before the end of the 3-year term encouraging them to continue coverage with a standard NFIP policy. Continuance of Coverage After the initial 3-year policy expires, individuals are encouraged to continue coverage with an Individual Policy. The Individual Policy is in effect as long as the repaired building exists. Tell the participants that the premium for the GFIP, initially, is a flat fee of $200 per policyholder. Explain that, thereafter, the premium may be adjusted to reflect NFIP loss experience and any adjustment of benefits under the Individuals and Households Program (IHP). Note that the term of the GFIP is 37 months and begins 60 days from the date of the disaster declaration.� Tell the participants that coverage for individual grantees begins on the thirtieth day after the NFIP receives the required data for individual grantees and their premium payments.�
SFIP Claims
Statutory limit of coverage is:$250,000 for residential buildings; $100,000 contents$500,000 for other residential; $100,000 contents$500,000 for nonresidential buildings; $500,000 contentsTotal claim, including ICC, cannot exceed statutory limit
The claim procedure is:• Report any flood loss to insurance
agent/company • File a “proof of loss” within 60 days of date
of loss• A claims adjuster will be assigned to adjust
loss
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Presenter
Presentation Notes
Explain that the maximum amount collectible under the SFIP for both the ICC payment and the direct loss payment for flood cannot be greater than the maximum limits of coverage for that class of buildings. The statutory limits of flood insurance building coverage are: $250,000 (residential). $500,000 (nonresidential). Review the claim procedure: A flood insurance policyholder should immediately report any flood loss to the insurance company or agent who wrote the policy. A claims adjuster will be assigned the loss, and the policyholder must file a “proof of loss” within 60 days of the date of loss. A policyholder whose policy is with a WYO company must follow the company’s claim procedures. Note that the 60-day time limit for filing a proof of loss remains the same.
Increased Cost of Compliance (ICC)
• ICC coverage (up to $30,000; no deductible)
• Available to help property owners pay for mitigation measures to bring NFIP insured structures into compliance
• ICC Eligible structures:• NFIP insured and in an SFHA• Are noncompliant with floodplain ordinance at
time of loss• Are substantially flood damaged• Have suffered repeat flood losses and
community ordinance requires compliance
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Presenter
Presentation Notes
Explain that Increased Cost of Compliance (ICC) coverage is available to help property owners pay for mitigation measures to bring insured structures into compliance. Tell the participants that the NFIP will pay up to $30,000 for losses sustained prior to May 1, 2003, and up to $30,000 (with no deductible) for losses sustained on or after May 1, 2003, for the cost to elevate, floodproof (for nonresidential buildings only), relocate, elevate, or demolish the building, or any combination thereof. Note that these activities are referred to by the acronym FRED. Explain that eligible structures are: Located in an SFHA. Noncompliant with the floodplain ordinance at time of loss. Substantially damaged, meaning the cost of repairs is more than 50 percent of fair market value. Suffering from repeat losses. Note that, when the FPM issues a Community Official Substantial Damage/Repetitive Loss Declaration, the policyholder can file an ICC claim on a structure . Explain that FEMA Unified Hazard Mitigation Assistance grants allow ICC benefits to be used as part of the non-Federal cost share for mitigation projects.
Proof of Loss must be filed within 60 days of the date of the Substantial Damage letter from the community.
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Presenter
Presentation Notes
Explain that Increased Cost of Compliance (ICC) coverage is available to help property owners pay for mitigation measures to bring insured structures into compliance. Tell the participants that the NFIP will pay up to $20,000 for losses sustained prior to May 1, 2003, and up to $30,000 (with no deductible) for losses sustained on or after May 1, 2003, for the cost to elevate, floodproof (for nonresidential buildings only), relocate, elevate, or demolish the building, or any combination thereof. Note that these activities are referred to by the acronym FRED. Explain that eligible structures are: Located in an SFHA. Noncompliant with the floodplain ordinance at time of loss. Substantially damaged, meaning the cost of repairs is more than 50 percent of fair market value. Suffering from repeat losses. Note that, when the FPM issues a Community Official Substantial Damage/Repetitive Loss Declaration, the policyholder can file an ICC claim on a structure . Explain that FEMA Unified Hazard Mitigation Assistance grants allow ICC benefits to be used as part of the non-Federal cost share for mitigation projects.
Lowest Floor Guide
Topics include:• Lowest Floor Determination• Use of Elevation Certificate• Specific Building Drawings• Floodplain Management
• Lowest Floor not the same as Lowest Floor for Rating
• Different measurements for BFE/LFE
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Presenter
Presentation Notes
Distribute the Lowest Floor Guide. Review the contents, which include the following topics:: Lowest Floor Determination: Insurance agents need to determine the lowest floor so that the appropriate rate can be applied. Use of Elevation Certificate: The Elevation Certificate is used to properly rate buildings located in SFHAs. Specific Building Drawings: The Elevation Certificate includes drawings of different building types. Explain that the certifier chooses the correct drawing for the building type.� Floodplain Management: Note that the floodplain management Lowest Floor is not identical to the Lowest Floor for Rating insurance: An elevated or crawl space building without the proper venting is a floodplain management violation. For insurance purposes, because there is limited coverage for the crawl space or lower level, the lowest floor is the next level and a loading factor is added to account for the reduced lower level/crawl space coverage. Explain that measurements of BFE and lowest floor elevation (LFE) are different: Floodplain management measures LFE and BFE in tenths of a foot. Insurance agents round the BFE or LFE to the nearest whole number. As a result, an LFE that is 0.5 feet below the BFE by floodplain management criteria could be rounded upward and considered at BFE for insurance purposes.
LFE/BFE Consideration
• Enclosure/crawlspace• Attached garage• Basement• Hanging enclosures• Rounding• Loss of CRS discount
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Presenter
Presentation Notes
In section we will discuss how the lowest floor elevation is determined and used in floodplain management and flood insurance. These particular topics can demonstrate some of the inconsistencies that exist between the two.
Lowest Floor Elevation
• For non-elevated buildings: • Top of slab• Floor of basement
• For elevated buildings:• AE Zone - top of elevated floor
• If enclosure meets non-elevation design requirements
• Parking, Storage, Access
53
Basement and Enclosure Implications
• Encouragement of non-compliance• Increased flood insurance costs• Increased disaster assistance• Increased flood claims• Conflicts between floodplain
management officials and flood insurance policyholders
• Increased debris• Limited coverage
54
Elevation and Floodproofing Certificate (EC)
Elevation Certificate• Used to document:
• Structure's floor elevations • Elevation of grades adjacent to
building• Elevation of machinery/equipment • Size of enclosure or garage• Number and size of flood openings
Floodproofing Certificate • Used for documenting
floodproofed-nonresidential buildings
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Presenter
Presentation Notes
Explain that: FEMA's Elevation Certificate (EC) was approved for use effective February 13, 2006, through February 28, 2009. The form requires the certifier to provide the square footage of the enclosed area below the elevated floor and at least two photographs of the building, if the EC is being used to obtain flood insurance. Two pages provide for attaching two or more color photographs of the building. Photographs must be a minimum of 3" x 3" and may be digital or analog. The Elevation Certificate is used to document a structure’s elevation, and is retained in the FPM’s records. The floodproofing of nonresidential buildings may be permitted as an alternative to elevating to or above the base flood elevation (BFE); however, a floodproofing design certification is required. Note that this form must be used for that certification. The Floodproofing Certificate also is retained in the FPM’s records. The certificates are available at http://www.fema.gov/business/nfip/elvinst.shtm.
Elevation Certificate
• Must be completed by a licensed surveyor, professional engineer or architect
• Some can be done by a local official or even the homeowner (AO and A (w/o BFE).
• New EC form just released 1-2016• Must include two photos from two sides
of the home• BFE: Base Flood Elevation • If LAG is at or above the BFE, can apply for
a LOMA except for unnumbered A zones
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Elevation Certificate
57
Elevation Certificate
58
Elevation Certificate
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Pre-FIRM vs. Post-FIRM Rating
Under the NFIP’s Regular Program: • Pre-FIRM SFHA rates are subsidized
• Elevation info (EC) not required• Post-FIRM elevation rating can be
used to rate Pre-FIRM structures if more advantageous
• Post-FIRM SFHA rates are full risk actuarial• Elevation info (EC) is required• Rates largely based on elevation
difference between lowest floor and Base Flood Elevation
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A Post-FIRM AO Zone rating varies:With an EC and meets elevation requirements, it’s low cost. Without an EC and compliance, it’s high cost
Presenter
Presentation Notes
Explain that, under the NFIP Regular Program: Post-FIRM elevation-rated risks apply. A pre-FIRM elevated building is rated at post-FIRM rates. A post-FIRM AO Zone rating differs: With an EC, the rate is low. Without an EC, the rate is two to three times higher.
Determining Pre- or Post-FIRM
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PRE POST
08/01/1983
Determining Pre- or Post-FIRM
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PRE POST
Does a map revision change the Pre- or Post-FIRM date?
Other Rating Situations
• Tentative Rates• Provisional Rates• Building in More Than One Flood
Explain that special rating situations include: Tentative Rates Provisional Rates Submit-for-Rate Buildings in More Than One Flood Zone Highest Risk Zone Hanging Enclosures Effects on Rating
Submit for Rate: Documentation
The following data must be submitted for risks requiring an in-depth underwriting analysis:
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Completed application
Photos EC Copy of variance Square footage of
enclosure(s) List of machinery
and equipment/value
Applicant’s statement of year built (enclosure)
Masonry walls –signed letter from community official
List of machinery and equipment in basement and value
Signed elevation determination form
V zone certificate
Presenter
Presentation Notes
Explain that properties at high flood risk because of peculiarities in their exposure to flooding do not lend themselves to preprogrammed rates. These risks require an indepth underwriting analysis and must be submitted to the NFIP for an individual (specific) rate. Review the data requirements for a Submit-for-Rate application: Completed application Photos EC Copy of variance Square footage of enclosure(s) List of machinery and equipment/value Applicant’s statement of year built (enclosure) Masonry walls – signed letter from community official List of machinery and equipment in basement (if any) and value Signed elevation determination form Post ’81 V Zone (see Flood Insurance Manual)
Other Structures
What do you do with them?
If anything?
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Accessory or Appurtenant Structures
• Let’s define them• Look at some examples• How do we insure them?• What are the insurance implications?
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Accessory or Appurtenant Structures
“Appurtenant Structure means astructure which is on the same parcel of property as the principal structure to be insured and the use of which is incidental to the use of the principal structure.”
44CFR59.1 Definitions
Accessory structures, used solely for parking (two-car detached garages or smaller) or limited storage (small, low-cost sheds)
FEMA Technical Bulletin 7-93
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Accessory or Appurtenant Structures
68
To be insurable, must be affixed to a permanent foundation
Accessory Buildings
• Insurance implications:• Risk-rated accessory
buildings• Insured separately for
coverage to apply• Exception: Detached
garages
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Presenter
Presentation Notes
The SFIP allows for up to 10% of the building coverage moved to cover the detached garage as long as there is not residential purpose in the detached garage.
Cancellation/Nullification
Flood insurance policy may be cancelled/ nullified for limited list of valid reasons, but
Maintenance of flood insurance is importantVerify required documentation as well as continuous coverage
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Presenter
Presentation Notes
Explain that valid reasons to cancel a flood insurance policy include: Building sold or removed. Contents sold or removed. Policy canceled and rewritten to establish a common expiration date with other insurance coverage. Duplicate NFIP policies. Nonpayment. Risk not eligible for coverage. Property closing did not occur. Policy not required by mortgagee. Insurance no longer required by mortgagee because property is no longer located in an SFHA due to a physical map revision. Condominium policy (unit or association) converting to residential condominium building association policy (RCBAP). Mortgage paid off. Voidance prior to effective date. Voidance due to credit card error. Policy was written to the wrong facility (severe repetitive loss property). Continuous lake flooding or closed basin lakes. Cancel/rewrite due to misrating. Fraud. Cancel/rewrite due to map revision Emphasize the importance of maintaining flood insurance if there is no valid reason to cancel.
Map Changes
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Presenter
Presentation Notes
As you can see, the maps are extremely important and we have made significant strides in mapping, which are continuing. As you know, the maps are very important. We rely on the maps to accurately depict the flood risk and they are vitally important in: Educating property owners about their flood risk and For lenders in making sure that properties at high risk are covered by a flood insurance policy.
Map Revision
Before
Map Revision
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After
“In many instances, insurance agents did not correctly apply the NFIP grandfathering procedure, newly mapped procedure, or Preferred Risk Policy (PRP) eligibility.”
- Office of the Flood Insurance Advocate (2016 Annual Report)
• PRP and map changes
• Newly Mapped vs. Grandfathering
• Rating Options – which one is the best?
Getting the Message
Properties mapped into Special Flood Hazard Areas
Mandatory Purchase of Flood Insurance Required?
Impacts
Enter SFHA
Presenter
Presentation Notes
Slide 51 Section 5 – Impacts of Mapping Changes Some property owners are moved into special flood hazard areas and that may require them to purchase flood insurance while others… (next slide)
Properties mapped out of Special Flood Hazard Areas
Eligible for Low-Cost Preferred Risk Policy?
Impacts
Exit SFHA
Presenter
Presentation Notes
Slide 52 Section 5 – Impacts of Mapping Changes …are removed from the floodplain. (next slide)
• Best answer-it depends!• If the building is in a B, C or X zone the
rates are approximately $500 for a residential home for $250,000 building/$100,000 contents
• High-Risk Flood Zone rates will depend on a variety of factors
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Essential Elements of Rating
• Emergency vs. Regular Program• Community Name CID• Pre-FIRM/Post-Firm• Coverage/Deductible• Flood Zone• Building Occupancy• Building Type• Number of Floors• Foundation Type• Basement/Enclosure• Machinery/equipment location• BFE• LFE• CRS class• Fees and Surcharges
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Presenter
Presentation Notes
Present and discuss the rating elements Pre-firm and Post-firm 12/31/1974 floodplain management vs. flood insurance Loss of CRS at -1> Annexation Community Name and Number ( 6 digit community ID number) Building Type depends of usage of the building % of use Single family-incidental occupancy< 50% of total square footage 2-4 family- incidental occupancy <25% of total square footage Other Residential-incidental occupancy<25% total square footage All of these change occupancy to non-residential usage There are a number of foundation types that affect both floodplain management and the rating of flood insurance Crawl Space-Above and below grade Slab on grade Elevated building with an enclosure Lowest Floor guide in the Flood Insurance Manual is helpful Discussion/Activity Exercise Handout- Bulletin – Bulletin W-0401 March 10, 2004 “Claim Payments for enclosures at or above flood plain elevation
What is a Preferred Risk Policy (PRP)?
• Lower-Cost Flood Policy
• B, C, X, AR & A99 Zones
• Building/Contents Combinations
• Loss eligibility
Impacts Premium Comparisons*
$200,000 Bldg$80,000 Contents
Pre-FIRM AE Zone $3,676Post-FIRM +1 AE Zone
$1,087
Standard X Zone $2,037Preferred Risk Policy
$425
Single family, primary residence, one floor, no basement, minimum
deductibles (4/1/17 rates)
Presenter
Presentation Notes
Slide 54 Section 5 – Impacts of Mapping Changes – What is a Preferred Risk Policy? Let’s take a quick look at the Preferred Risk Policy. The Preferred Risk Policy or PRP is a low-cost policy that’s available to buildings in B, C and X zones that meet certain loss eligibility requirements. The NFIP packages both building and contents options for insureds to choose from. Take a look at just how much lower the PRP premium is by looking at the premium comparison chart. For $200,000 building and $80,000 contents coverage on a Pre-FIRM AE zone property, the premium would be more than $2600 a year. Even a newer, Post-FIRM building that is elevated a foot above the base flood elevation in an AE zone would cost just over $800 a year while a standard, non-preferred X zone policy would cost more than $1500 annually. But the PRP at the same limits would cost just $353. The PRP is a great way for an insured to keep their same protection at a much reduced cost. (next slide)
Messaging
Rating Structure for PRP and Newly Mapped
• Policies on Newly Mapped Structures as of April 1, 2016
• Preferred Risk Policies and PRP Eligibility Extension
• Rollovers and Transfers under Newly Mapped Procedure
• Ineligible Properties for Newly Mapped.
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Presenter
Presentation Notes
Newly Mapped Policies Effective on or after April 1, 2016 Beginning with eligible new and renewal policies effective on or after April 1, 2016, a multiplier will be applied to the policy base premium. FEMA will provide a table of multipliers in the Newly Mapped section of the Flood Insurance Manual. Initially, the multiplier will be 1.000 for all Newly Mapped policies. Beginning, January 1, 2017, the multiplier will vary based on the calendar year in which the map became effective that mapped the structure into the SFHA. It is expected that the table will be updated effective January 1 of each following year. Preferred Risk Policies The PRP premium tables are being revised so that they too will now only contain the base premium. The rating steps for PRPs will be identical to the rating steps for Newly Mapped policies. The PRP will also use a multiplier of 1.000; for a PRP, the factor will always be 1.000. Former PRP EE Policies All PRP Eligibility Extension policies that renewed under the Newly Mapped procedure between April 1, 2015, and April 1, 2016, will also use the revised Newly Mapped tables and the new rating methodology. These policies will also use the same multiplier tables. ONLY FOR AGENT SEMINARS� Rollovers and Transfers under the Newly Mapped Procedure So how do we handle rollovers and transfers under the Newly Mapped Procedure? As an agent, when renewing coverage under the Newly Mapped procedure with another carrier, the insurer processing the renewal must obtain a copy of the expiring declarations page and establish that payment has been received within 90 days of the prior policy expiration. If payment is received more than 90 days after prior policy expiration, whether with the same or a different NFIP insurer, the property is no longer eligible for the Newly Mapped procedure. In order to facilitate rollovers and transfers, insurers must display the date that a property was newly mapped into the SFHA on the Newly Mapped policy declarations page. This data was collected on the Application form beginning November 1, 2015, and must be reported to the NFIP. Newly Mapped Properties Ineligible for the Newly Mapped Procedure Properties not covered under the NFIP as of March 31, 2016, and that were newly mapped into the SFHA by a FIRM revision that occurred between October 1, 2008, and April 1, 2015, are no longer eligible to be rated using the Newly Mapped rating procedure. The following information is very important: • Post-FIRM properties newly mapped into the SFHA between October 1, 2008, and April 1, 2015, and not covered under the NFIP as of March 31, 2016, may qualify for “built-incompliance” grandfathering. • Pre-FIRM properties newly mapped into the SFHA between October 1, 2008, and April 1, 2015, and not covered under the NFIP as of March 31, 2016, may qualify for Pre- FIRM subsidized rates. Existing policies issued using the Newly Mapped procedure between April 1, 2015, and March 31, 2016, that cover properties that were newly mapped into the SFHA by a FIRM revision that occurred between October 1, 2008, and April 1, 2015, may continue to renew under the Newly Mapped procedure, so long continuous coverage is maintained. Such policies may also renew under the Newly Mapped procedure the first instance where coverage renews by means of a payment received within 90 days of expiration; any subsequent instances will render the policy ineligible for renewal under this procedure. The same rule applies to the renewal of Newly Mapped policies issued on the basis of a map change after April 1, 2015. On or after April 1, 2016, a property is ineligible for the Newly Mapped procedure when the first policy effective date is more than 12 months after the FIRM revision newly mapping the property from a non-SFHA into an SFHA. The Newly Mapped procedure is also not available for policies on properties in the Emergency Program or properties mapped into the SFHA for the first time by the initial FIRM upon entry into the Regular Program. Further out, as of October 1, 2016, the newly mapped procedure will also not apply to policies insuring properties located in Zone A99. This change is made to comply with the language of the statute, which excludes subsidized policies from eligibility for the newly mapped rating procedure. Additional guidance will be provided at a later date.
SFHA to non-SFHA
• “Your risk is reduced, not removed.”
• “People in moderate-and low-risk areas file more than 20% of all NFIP flood insurance claims and receive one third of flood disaster assistance.”
• “You may be eligible for a lower-cost PRP, which includes contents.”
• “Stay financially protected and get money back once the map is effective.”
• “There will be no gaps in coverage and no additional money up front.”
Lower Costs, Improve Coverage, Stay Protected
Map Messaging
What’s the best rate?
Best Rate?
OPTION 1Buy Insurance BEFORE map
changes
OPTION 4Use NEW
Zone or/BFE
OPTION 2Use OLD zone or
BFE at time of construction
(Grandfather Rule)
REMEMBER that Zone Xmay not be the best rate!
OPTION 3Newly Mapped
Procedure
Presenter
Presentation Notes
Reminder: Pre-FIRM structures have only one opportunity to lock in the flood zone and use Option 1 for new policies. For Pre-FIRM structures that are being rated with an EC, Option 2 would apply to them under the Grandfather Rule. For Post-FIRM structures, they have two opportunities to lock in the zones and/or BFE under Option 2. If they were built in compliance with a zone or BFE, we will still honor that compliant rating as long as the property has not been altered to have a greater risk or its has sustained substantial improvement or damage. Thanks to HFIAA, we have an additional, limited rating method for eligible structures to have a rating advantage under Option 3 If a structure is moved into a high-risk flood zone, they have 12 months from the effective date of the map revision to obtain a policy. This include the 30-day waiting period. They will pay a higher premium than if they purchased the coverage before the map change date under Option 1. Sometimes, we reduce the BFE or change the flood zone to a lower risk. Option 4 would then be applicable even during the policy term. Be careful though on this option, many property owners will think that they are no longer at risk and want to cancel their policies. We must stress that the risk is reduced, not eliminated.
Review: Insurance Progression
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B, C
, to
SFH
A
Pre-Map ChangePRP
$499 Map
ped
into
A Z
one 1-2 years at
PRP then Newly Mapped Rate$593 Z
one
B, C
or
X
Gra
ndfa
ther
ed
Standard X Zone
Target
$2,842
April, 2017 Rates
$250,000 Building$100,000 ContentsWith Basement
Insurance Messaging-Map Changes
• Increase in BFE (or mapped A to V zone)• Pre- or Post-FIRM buildings can lock
in BFE or zone by policy before the maps change
• Post-FIRM buildings can lock in BFE or zone after maps become effective, but must show it was built in compliance
• What about Substantial Damage or Improvements?
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Case Study FactsTom and Tammy Torrent are in the process of refinancingtheir home in Salt Lake City, UT, when their lender tellsthem they will be required to purchase flood insurance.
About the homeThey have never had flood insurance before but theyare now finding out that Salt Lake City’s map wasrevised effective August 2, 2012, and their home hasbeen mapped into zone AE.
What are the rating options?The house was built in 1984 – so is it Pre-FIRM or Post-FIRM? (Initial FIRM Date 8/1/1983)Is it now eligible for the Newly Mapped procedure?
Salt Lake City, UTRating Options
Case Study
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• Eligible for Newly Mapped procedure?
• Map revision effective 8/2/2012
• NM Procedure when into effect 4/1/2015 so the policy had to be effective before 4/1/2016
• Waiting period – 0 days (refinancing)
Case Study-Rating Options-Salt Lake City, UT
Rating Approach Eligibility (Y/N)
CurrentYear
Premium*
Newly Mapped No N/A($492)
GrandfatherRating – X
Yes $1,540
Pre-FIRMSubsidized
No N/A
Full-Risk Rating Yes $2,126
* $200,000 building coverage, -3 BFE, Single family, two floors,
basement, minimum deductible (4/1/17 rates)
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Case Study FactsSam and Sara Swell have lived in their primaryresidence in South Ogden, UT, for years. They’ve justbeen contacted by their mortgage company telling themthat flood insurance is now mandatory on their home.About the homeSouth Ogden’s map was revised in 2015 but theSwells were never informed of how it affected themuntil now. Their home was mapped from zone X onthe prior map to zone AE on the current one. Theyhave an EC that shows the are built to the BFE.What are the rating options?The house was built in 1978 (initial FIRM-3/1/1983–so is it Pre-FIRM or Post-FIRM? Is it now eligible forthe Newly Mapped procedure?
South Ogden, UTRating Options
Case Study
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Eligible for Newly Mapped procedure?• Map revision effective
6/2/2015• Policy needed to be
effective prior to 6/2/2016
• Map change pre-dates effective date of Newly Mapped procedure
• Waiting period – 30 days
Case Study-Ratio Options-South Ogden, UT
Rating Approach Eligibility (Y/N) Current Year Premium*
Newly Mapped No N/A($492)
GrandfatherRating – X
No N/A($1,562)
Pre-FIRMSubsidized
Yes $2,270
Full-Risk Rating Yes $1,797
• $200,000 building coverage, 0 BFE, Single family, one floor, no basement, minimum deductible (4/1/17 rates )
Close Calls
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Flood Insurance Manual Map Section Page 2-3
Presenter
Presentation Notes
For those properties where the delineation of the flood zone is so close, there is a process called Letter of Map Amendment Out as Shown. Although with aerial photography makes these scenarios less likely, there will still be instances where it will need to be determined by FEMA for guarantee. Information can be obtained on FEMA.gov or in the Flood Insurance Manual, Mapping Section, Page 2-3. It contains the list of documents that the property owner will need to submit to FEMA when a property owner believes that the mandatory purchase requirement is in error and that the building is horizontally out of the high-risk flood zone.. Keep in mind, the lender can still require flood insurance based on the mortgage contract, and should in this case. As an insurance agent , your E & O could also be at risk if you do not advise the property of the close proximity of the high-risk zone.
Community Rating System (CRS)
• The three goals of the CRS are to:• Reduce flood losses• Facilitate accurate insurance rating• Promote the awareness of flood
insurance• Communities must be in full
compliance with the NFIP and be in the Regular phase of the program
• CRS discounts the flood insurance premium rates of communities that exceed the minimum NFIP requirements
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Presenter
Presentation Notes
Explain that the NFIP Community Rating System (CRS) is a voluntary incentive program that recognizes and encourages community floodplain management activities that exceed the minimum NFIP requirements. Tell participants that, as a result of CRS enrollment, flood insurance premium rates are discounted to reflect the reduced flood risk resulting from the community actions meeting the three goals of the CRS: Reduce flood losses; Facilitate accurate insurance rating; and Promote the awareness of flood insurance. Explain that communities must be in full compliance with the NFIP and be in the Regular phase of the program. .
CRS Classifications
• CRS premium class discounts in 5% increments
• A Class 1 community premium discount 45%; Class 9 premium discount 5%
• CRS classes are based on creditable activities, organized under four categories:• Public Information• Mapping and Regulations• Flood Damage Reduction• Flood Preparedness
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Presenter
Presentation Notes
Explain that, for CRS participating communities, flood insurance premium rates are discounted in increments of 5 percent. Note that a Class 1 community would receive a 45 percent premium discount, while a Class 9 community would receive a 5 percent discount . Explain that Class 10 is for communities that do not participate in the CRS and thus receive no discount. Note that the CRS classes for local communities are based on 18 creditable activities, organized under four categories: Public Information Mapping and Regulations Flood Damage Reduction Flood Preparedness Note that the CRS Coordinator’s Manual is available at http://www.fema.gov/library/viewRecord.do?id=2434.
233
468
366
216
122
2 3 5 1
9 8 7 6 5 4 3 2 1
1416 CRS Communitiesas of October 1, 2016
CRS Class
CRS Classifications
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Presenter
Presentation Notes
Before you get too excited about the potential 45% discount, let's look at what most communities actually getting. This graph shows you that the majority of the communities are class 6-7-8-9. That shouldn't surprise you because those are the classes that need the fewest points. About ten years ago, the class 9 column was taller than the class 8 column. So what this shows is that over the years, the curve is moving to the right. Communities join at a class 9 or class 8 and over the years. We have found that over the years they improve their programs or they document that they are doing more. As result classes have improved over time. You'll notice a big difference between a class 5 and a 4. It takes more than just points to go from a 5 to a 4. There are a series of other prerequisites, such as having a comprehensive floodplain management plan. So there are only 11 of the 1391 communities that are class 1-2-3 and 4. Those are our "star" communities.
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Presenter
Presentation Notes
CRS communities are all over the country. You can see concentrations of communities in metropolitan areas like Denver, Dallas, San Francisco, and Houston, but there are also a large number of communities along the southeast coast. These areas have been exposed to flooding, they've had a lot of recent development, there's a lot of interest in floodplain management. Florida has 17% of all the CRS communities and 40% of all the flood insurance policies in the CRS. The "star" communities are all over the country, but especially out west at the opposite corner of the country. These communities are motivated to get into the CRS not necessarily because they have a lot of policies and a lot of exposure, but they have excellent programs that are preventing a lot of floodplain development and they want to keep those programs going. There many reasons communities join, and as you can see, communities all over the country are active in the program.
Utah CRS Communities
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Recent and Up-comingLegislative Changes
• NFIP Reauthorization in 2017• October 2017 and April 2018 Flood
Insurance Manual Changes
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Re-Underwriting Requirement
• October 1, 2017 Post-FIRM renewals• Review policies to determine if rating
is correct• Grandfather vs Newly Mapped vs
Current Map• Data usage• Corrections
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WYO Bulletin W-15046 issued October 1, 2015
Presenter
Presentation Notes
Beginning no less than 180 days prior to renewal, NFIP insurers are required to review their existing policies renewing on or after October 1, 2016, to determine if they are being rated based on information from the current FIRM, or from a prior FIRM (using the grandfathering or Newly Mapped rating procedures). If the policy is rated based on information from a prior FIRM, the NFIP insurer is required to update applicable indicators, and the current map information fields at the first renewal that is effective on or after October 1, 2016. All elevation data should be reported with the same datum as the current BFE. After the re-underwriting of renewal policies effective on or after October 1, 2016, has been completed, insurers will only be required to validate the current map information for subsequent renewals of policies covering property located on a map panel that changed at least 90 days prior to the most recent renewal date on or after October 1, 2017. The information gathered from this effort will be used in mailings sent by the NFIP Bureau and Statistical Agent. The mailing will provide a narrative description of the rating, as well as generic sample full-risk premiums if the policy is grandfathered, Newly Mapped, or subsidized. The mailing to the insured will be held until the insurer completes the reunderwriting. If an insurer discovers that the original Application was rated with the incorrect zone, and the policyholder was charged a higher amount than would be determined using the correct zone, the policy may be reformed for up to 5 policy years. However, if the Application was written correctly, and the zone or BFE has changed since, the policy may be reformed for the current term only. When the insurer discovers a misrating resulting in a higher amount due, the effective date of the correction will be the date of discovery, unless the discovery of misrating occurs within 60 days prior to a prospective renewal (after the first renewal offer has already been made). In this case, the correction will apply to the prospective renewal policy using the renewal effective date. The policy may not be canceled for a full premium refund due solely to a misrating. FEMA will provide under separate cover a sample letter that FEMA will send to policyholders to communicate their risk.
Subsidy Elimination for Lapsed Policies
• HFIAA Section 3 prohibits Pre-FIRM subsidized premium for lapsed policy, except for no longer required
• Prohibit Pre-FIRM subsidized for NFIP lapsed policies where premium received after 90 days from expiration date
• Transfer of NFIP policy• Non-NFIP policy
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Presenter
Presentation Notes
Section 3 of HFIAA prohibits the use of Pre-FIRM subsidized rates for “any policy under the flood insurance program that has lapsed in coverage, unless the decision of the policyholder to permit a lapse in flood insurance coverage was the result of the property covered by the policy no longer being required to retain such coverage.” Effective April 1, 2016, FEMA will prohibit the use of Pre-FIRM subsidized rates for policies reinstating coverage for Pre-FIRM buildings that were previously insured by the NFIP where the NFIP coverage is reinstated by means of a payment received more than 90 days after expiration or cancellation of the policy. A policy will not be eligible for Pre-FIRM subsidized rates or the Newly Mapped procedure, as required by Section 3 of HFIAA, under the following conditions: (1) The policy reinstates coverage on a building that was previously covered by a Standard Flood Insurance Policy (SFIP) that expired or was cancelled; (2) One or more of the named insureds on the new policy was either a named insured on the expired or cancelled policy or had an ownership interest in the building at the time the policy expired or was cancelled; (3) The policy was reinstated with premium received: (a) more than 90 days after prior policy expiration or cancellation where the named insured has maintained continuous coverage on the property from April 1, 2016 to the prior policy expiration or cancellation date; or (b) more than 30 days after the prior policy expiration or cancellation date, where the named insured has not maintained continuous coverage on the property from April 1, 2016 to the prior policy expiration or cancellation date; and (4) The policy expiration or cancellation was for a reason other than that: (a) the insured was no longer legally required to obtain and maintain flood insurance; Or (b) the insured property was in a community that was suspended from the NFIP and the policy was reinstated within 180 days of reinstatement of the community as a participant in the NFIP. According to procedures effective prior to the enactment of BW-12 and HFIAA, the NFIP allows coverage to be reinstated by means of a renewal if payment is received by the NFIP within 90 days of the policy expiration or cancellation date. During the first 30 days following expiration, the policy may be reinstated with no change to the effective date (commonly referred to as “the grace period”). During the remaining 60 days, coverage is reinstated with a 30-day waiting period (up to 120 days after expiration), such that there is no coverage for a loss during this period. However, if premium is received within 90 days, a new Application is not required, and insurers report the policy transaction as a renewal to the NFIP system of record. Thus, a reinstatement of coverage by means of a payment received by the insurer within 90 days of policy expiration or cancellation is not considered subject to Section 3 of HFIAA. When transferring a policy from one NFIP insurer to another, a copy of the previous declarations must be obtained by the new insurer to demonstrate that coverage was reinstated by means of a payment received by an NFIP insurer within 90 days of expiration. This same rule may be used to establish eligibility for “continuous coverage” grandfathering, or processing a renewal of coverage for a Newly Mapped property. However, this renewal process may only be utilized one time per policy after April 1, 2016. A reinstatement by means of a payment received 90 days after expiration is subject to the 30-day wait, such that the reinstatement effective date is 120 days after expiration or cancellation. Therefore, a property covered by a non-NFIP policy purchased on the private market for the period longer than 120 days after NFIP coverage has expired is considered to have lapsed from the NFIP, even if there is no period of time that the property was not insured for flood damage. To facilitate the process to identify affected policies that have expired more than 90 days, and are therefore lapsed, the following questions were added to the Application form on November 1, 2015, and are to be used to implement Section 3 for new business transactions effective on or after April 1, 2016: (1) Has the applicant had a prior NFIP policy for this property? (2) Was the policy required by the lender under mandatory purchase? (3) Has the prior NFIP policy ever lapsed while coverage was required under mandatory purchase by the lender? (4) Was the lapse the result of a community suspension? If yes, what is the suspension date? What is the reinstatement date? (5) Will this policy be effective within 180 days of the community reinstatement after suspension referred to in (4) above? Where an Application and premium are submitted more than 90 days after prior policy expiration, or the policy has renewed with a lapse one time already since April 1, 2016, a new table is provided in the Flood Insurance Manual that indicates how the ‘yes’ or ‘no’ responses to these questions on the Application can combine for a Pre-FIRM building to be eligible for Pre-FIRM subsidized rates. For all new business covering a Pre-FIRM building rated in SFHAs, the insurer must determine if the property is eligible for Pre-FIRM rates using the table provided in the manual. If the property is ineligible for the Pre-FIRM subsidized rates, the insurers must use full-risk rating procedures. The use of full-risk rates excludes Pre-FIRM subsidized rates and the Newly Mapped procedure. If the property is eligible for Pre-FIRM subsidized rates, the Pre-FIRM rate hierarchy indicated on Table 10 in the Rating Section of the NFIP Flood Insurance Manual should be used to determine the correct Pre-FIRM subsidized rate. After determining the correct Pre-FIRM subsidized rate, the insurer must compare the amount calculated to the full-risk rate if the EC or other underwriting information required for full-risk rating is available. When presented with an EC for Pre-FIRM property eligible for subsidized rates, insurers must retain the elevation information for comparison purposes for every renewal or endorsement transaction. For all policies receiving Pre-FIRM subsidized rates only, insurers must include a statement on the renewal offer(s) and expiration/reissue notices indicating that payment received more than 90 days after expiration may result in a loss of eligibility for Pre-FIRM subsidized rates.
Saving Money on Flood Insurance
• FEMA has programs to help owners reduce their risk and save money on flood insurance
• Community-wide discounts through the Community Rating System (CRS)
• FEMA grant programs support rebuilding and relocating
• Use of higher deductibles to lower premium costs
But the smartest way to save may be to build higher
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Now that HFIAA has been enacted and moving forward, we need to be cognizant and aware of ways our stakeholders can reduce their risk as well as their flood insurance premium. The first way is the Community Rating System. This is a voluntary program where communities are able to obtain credits for duties they already may perform. Some examples may include requiring and maintaining FEMA elevation certificates for structures in your area, or having flood insurance brochures and conducting outreach that promotes the benefits. These credits that you could obtain could mean significant flood insurance premium discounts. For more information regarding CRS, please see the link at the end of this presentation. Another idea would be FEMA grants that may be available in your area. These grants could be used to support various mitigation activities such as elevation or even buy outs. You may contact your local community for more information regarding the grant programs. Also, a policyholder may be able to increase their deductible to assist them with lowering their premium. As always, use caution with this, because a deductible will need to be paid in the event of a flood loss, and a high deductible could be burdensome.
Key Takeaways -Mitigation
Understand the Risk
Insure the Risk
Build Safer, Stronger & Smarter
Collaborate & Communicate
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BW 12 provides an opportunity to have a discussion about mitigation: Property Owners Need to Understand their Risk: 2012 Flood Risk Survey: Only 31% think their community can flood Only 12% think their home will ever flood regardless of where they live Buy Flood Insurance Many people believe that the standard homeowner or business owner policy covers them for flood Most people do not understand that disaster assistance is not the end all Collaborate & Communicate Among our stakeholders and partners We know this is key to the programs success or failure.
Tools and Resources
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There are many tools and resources available that will assist you in counseling your clients on the effects of the NFIP Reform Act
• NFIP iService Bureau -http://www.nfipiservice.com
• Community Rating System- www.crsresources.org
• Flood Insurance 101 – You Tube
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Here are some resources that you will find useful when sharing this message with your friends, family or clients. Two that I want you to pay particular notice to are the first, the Flood Insurance Reform Act webpage, which is located at the top of your screen. This site is updated on a regular basis and will have the latest information regarding the Homeowner Flood Insurance Affordability Act. The last bullet point talking about the Community Rating system… crsresources.org is a great website for you to learn more about this important program that can make your community more resilient.
